The new normal of hybrid work

(BLOOMBERG) – Working from home around one day a week will boost productivity by 4.8 per cent as the post-coronavirus economy takes shape, according to a recent study of more than 30,000 US employees. Much of that one-off increase is projected to come from reduced commuting time, a factor not usually captured by economists.

The transformation will deliver enduring benefits, according to Dr Steven Davis of the University of Chicago, who studies the evolving workplace and was one of the authors of the productivity study. The “positive consequences will be there indefinitely”, he said.

The clues were there even before Covid-19. In 2013, a landmark study by Stanford University found working from home boosted productivity by 13 per cent.

For all the optimism surrounding these tectonic shifts, some economists strike a note of caution. While recent research from the Federal Reserve Bank of San Francisco acknowledges that sweeping changes to the way people do business could boost efficiency, it warns against reading recent gains in productivity numbers as due to more home-working, citing data distortions.

Even the Bank of England accepts that hybrid meetings “may be more challenging”. A majority of managers worry about the impact of home-working on collaboration, company culture and well-being, according to the Organisation for Economic Co-operation and Development, which also cited employers’ concerns about their diminished ability to observe employees at work.

A study led by the University of Chicago’s Professor Michael Gibbs found employees worked longer hours at home to perform the same task, as focused time was broken up by domestic distractions like childcare and online meetings. The report also noted that people working from home may exaggerate their productivity in surveys to encourage adoption of the practice.

Former UK government adviser Giles Wilkes is more bullish. “The ability to deliver products in different places, make more efficient uses of property, and so forth, that is productivity driving innovation,” said Mr Wilkes, who recently published a report on Britain’s productivity woes.

Mr Yuri Suzuki, a partner at international design company Pentagram, does not miss his twice-daily 70-minute commutes. “After I came back home, I felt just exhausted – I couldn’t really think or create anything,” he said.

Freed from the grind of travel, he is able to “invest” time in creative thinking long after formal working hours. That has boosted productivity, with his team taking on double the number of projects than it did before the pandemic. To socialise with his team, he plans to return to the office once a week.

While hybrid work is taking root among educated, well-paid employees, less than half the workforce has that option, according to the McKinsey Global Institute.

Still, as more work happens away from traditional offices, workers will infuse a wider range of communities with their wealth and business knowledge, distributing economic gains more equitably, said economist Abigail Adams-Prassl of the University of Oxford.

That will have some painful consequences. City centre cafes, shops and hairdressers catering to professionals are most exposed, and this will hit annual spending in major US city centres relative to pre-pandemic levels. Manhattan alone would see a 13 per cent fall.

Mr Wilkes concedes that “a lot of people” will be hurt by the process of change. Nevertheless, he said that “the changes that we’ve been forced into are going to be beneficial on the whole”.

Hybrid working also has the potential to encourage a more diverse range of people into the workforce, Dr Davis believes, reducing longstanding productivity issues “by making use of the skills of people who were otherwise not working or not working very much”. That includes mothers and people living outside major cities.

The flexibility to work from home could also encourage older workers to stay in the labour force for longer, the UK’s Office for National Statistics said. That is a priority for economies confronting ageing populations.

The US arm of consultancy PricewaterhouseCoopers began ramping up some aspects of hybrid work – including flexibility on where and when to work and training on remote-work technology – back in 2017, said its chief people officer Michael Fenlon.

“Pre-pandemic we learnt that a culture of trust was essential for well-being and flexibility. Teams that adopted this were reporting stronger relationships, stronger collaboration, better teamwork and stronger relationships with clients,” he said. “We’ve used the pandemic to become even more intentional and explicit.”

Employers the world over are now grappling with that shift as they try to balance productivity growth with keeping staff creative and happy.

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